Every gallery owner has an insurance nightmare to recount and will gladly discuss the seemingly arbitrariness of insurance rates. For example, carriers apparently view certain locales as high-risk, and charge accordingly. "Some people’s premiums go sky-high, simply because they live on the ocean and that’s the property where they choose to display their art," Christie’s Amy Cappellazzo says.

Carriers also impose a growing array of demands on collectors. Valuations in the contemporary art market are on a tear—an Andreas Gursky photograph worth $500,000 two years ago may have been worth $1 million or more last year and be closer to $2.5 million this year—as investors drive up prices at auction houses. For owners, getting up-to-date appraisals and revising insurance policies to reflect the true value of a collection is important—but it’s also time-consuming and often costly, notes Patrick Devaney, managing director and senior trust officer at JPMorgan Chase in New York. And even then, if an artist’s work is the newest, hottest thing around, but has yet to make an appearance on the auction block, insurers may be reluctant to guarantee what the collector believes to be the full value of a new work.

Individuals who keep their collections at a vacation home overseas should be prepared to cover the costs of flying in not only an appraiser, but also the insurance agent. Even for established collectors in this environment, getting insurance is increasingly tricky. A Florida collector may find his provider demanding he build watertight storm closets to shelter art in case of a hurricane, as well as insisting he install backup generators to ensure that temperature and humidity controls are maintained.

"Insurers are increasingly focused on collectors having proper security," Devaney says. That may include strictures that their purchase of top-tier art remains confidential. Even lending to a museum may require a collector to dig into his own pocket to boost the museum’s insurance coverage, especially for smaller institutions with limited budgets.

Yet there is some good news on the insurance front. It is now possible to insure collections against new kinds of risks. Title insurance is one new option. In the wake of ownership controversies involving everything from antiquities at Los Angeles’ Getty Museum to Impressionist and Modernist works looted by Nazis, firms like newly launched ARIS hope that collectors will sign up for insurance promising that if anyone is able to prove that someone else has a stronger claim to the centerpiece of their collection, at least the collector won’t be left out of pocket. Customers have been slow to materialize, but all it may take is one more high-profile ownership controversy for the trend to catch on.

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The Hidden Costs of Art Collecting